Restructuring and Insolvency Manager Claire Mateer discusses the benefits of IVAs amid news of harmful ‘debt help’ advertisements.

This week, a BBC investigation uncovered allegations of IVA misuse by debt recovery and ‘debt help’ services. In recent months, several instances of such services targeting people in financial trouble have emerged, and the Citizens Advice charity has warned that worrying numbers of people have found themselves in unsuitable IVAs and unable to keep up with repayments, often because of inappropriate pre-IVA advice from providers.

As seen in the case reported this week, harmful services such as this are often advertised via social media and unfortunately can be targeted at those already in financial distress. With the cost-of-living crisis ongoing and interest rates stubbornly high, it is important to know what legitimate debt solutions are available in each specific circumstance, how they should operate, and when an IVA is a suitable, viable option.

An IVA, or Individual Voluntary Arrangement, is an effective debt solution if used in the right circumstances.  It is a formal insolvency procedure that allows a person who is unable to pay their debts as and when due, to make order of their financial affairs. It is a contract with clear, pre-agreed terms between an individual and their creditors that acts as a settlement for their unpaid debts.

An alternative to bankruptcy, IVAs have significant advantages when administered correctly and can be used to settle debts such as unpaid bank loans and overdrafts, outstanding credit card bills, HMRC debts or sole business trading liabilities.

Benefits include:

  • The opportunity to agree an affordable repayment plan, with help from your Insolvency Practitioner (IP).
  • The IP will contact the creditors to seek their agreement to the IVA for you.
  • Creditors cannot take any action while the IVA is in place.
  • Interest and charges stop on approval of the IVA.

However, it is important to know that:

  • IVAs can only be administered by a licensed Insolvency Practitioner regulated by an authorising body.
  • The terms and repayment amounts must be clearly agreed beforehand however your income and expenses will be reviewed annually to ensure the optimum repayments are being made.
  • Your IP will request details about assets and income, expenses, debts and creditors to arrange the IVA.

Ultimately, it is important to be wary of IVA and debt recovery advertisements on social media. While a company may choose to advertise this way, an IVA can only be arranged and administered by a licensed Insolvency Practitioner who will discuss your options. If unsure, always seek advice from a professional to find a solution tailored to your needs.

To discuss IVAs in more detail, contact Claire Mateer, Manager, Restructuring & Insolvency E: Tel: 028 9032 3466.